Texas Manufacturing Activity Continues to Expand; Production Index Highest in Two Years

DALLAS—Texas factory activity expanded for the fifth straight month in March, according to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey.

Texas produces more than 8 percent of total manufactured goods in the United States, ranking second behind California in factory production.

The production index, a key indicator of state manufacturing conditions, rose to its highest level in two years.

Additionally, capacity utilization rebounded, with the index rising to 15 in March after falling to 0 in February. The new orders index rose sharply into positive territory after dipping below zero last month. The indexes for shipments and growth rate of orders also turned positive in March.

The business activity and company outlook indexes rebounded into positive territory after sliding below zero in February.

Labor demand among manufacturers improved in March. Eighteen percent of firms reported increases in employment, pushing the index into positive territory for the first time since July 2008.

Strong upward pressure on raw materials prices continued in March, and the share of respondents reporting higher input costs remained near 40 percent. Finished goods prices fell for the second month in a row. Expectations of price increases for raw materials and finished goods over the next six months abated.

All indexes for future activity were positive but moved lower in March, suggesting producers have lowered their expectations for the pace of growth in factory activity in coming months.

The future business activity index and six–month company outlook index were positive but declined. Similarly, the indexes for future production, capacity utilization, new orders and shipments remained positive but fell in March.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity.